Saturday, September 10, 2005

"Vernon L. Smith, a Nobel laureate and professor of economics and law at George Mason University, recognizes the economic concerns that are often overlooked. He writes, “If we ignore this rule of optimality and begin abatement now for damages caused by emissions after 100 years, we leave our descendants with fewer resources - 100 years of return on the abatement costs not incurred - to devote to subsequent damage control. The critical oversight here is the failure to respect opportunity cost. Each generation must be responsible for the future effect of that generation’s emission damage. Earlier generations have the responsibility of leaving subsequent generations a capital stock that has not been diminished by incurring premature abatement costs.”

Often those arguing in favor of global warming policies today will make reference to "the precautionary principle," which seems to be an idea that amounts to "we shouldn't take chances with the future." Support for global warming policies today is also argued on the grounds that the present generation has obligations of justice to future generations. It seems to me that Vernon Smith's analysis suggests that those wanting government policies toward global warming today are quite possibly misguided in terms of those specific concerns. Would you agree?

Here is another thought. It seems to me that while the precautionary principle sounds reasonable, it doesn't really tell us very much at all. Specifically, while it suggests we should take precautions against a risk that a harmful event will occur in the future, it doesn't give us any basis for deciding what is a sufficient amount of precaution. On the other hand, it seems to me that Vernon Smith's approach leads us to think directly about that very question. Would you agree?